UMB(US:UMBF)2022-04-27 17:05Financial Data and Key Metrics Changes - The company reported net income of $106 million or $2.17 per share for Q1 2022, with pretax pre-provision income on an FTE basis at $125.7 million or $2.57 per share [6] - Net interest income was relatively flat at $210.4 million compared to the previous quarter, impacted by a reduction in PPP income and fewer days in the quarter [19][22] - Non-interest income totaled $123.7 million, an increase of 4.1% compared to the fourth quarter [6][28] - Total non-interest expense decreased by 3.5% on a linked-quarter basis [9][29] Business Line Data and Key Metrics Changes - Average loans excluding PPP balances increased by 15.6% year-over-year and more than 19% on a linked-quarter annualized basis [10] - Commercial and Industrial (C&I) balances grew by 35% on a linked-quarter annualized basis [10] - Average residential mortgage balances grew by 4.4% from the fourth quarter [11] - Non-interest expense trends showed a decrease driven by reductions in variable costs such as incentive compensation [29] Market Data and Key Metrics Changes - Average deposit balances increased nearly 12% on a linked-quarter annualized basis [15] - The average loan-to-deposit ratio remained low at just 53% for the first quarter, providing flexibility in a rising rate environment [15][82] Company Strategy and Development Direction - The company aims to leverage its strong loan growth and maintain a focus on regulatory capital ratios, which remain strong [27] - The strategy includes opportunistic M&A and maintaining a quarterly dividend of $0.37 per share [16][104] - The company is positioned well in the fund services and corporate trust sectors, anticipating growth driven by private equity and government spending [52][55] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the loan pipeline for the second quarter, expecting stronger gross loan production than in the first quarter [12][45] - Concerns were raised about the economic environment and potential recession, with a desire to maintain reserves around current levels [96][98] - The company is monitoring deposit betas closely in a rising rate environment, with historical averages around 50% [34][41] Other Important Information - The company transferred securities with a fair value of $2.9 billion from the AFS to HTM book to manage tangible capital [25] - The effective tax rate for the first quarter was 15.7%, with an anticipated range of 17% to 19% for the full year [29] Q&A Session Summary Question: Funding outlook in a rising rate environment - Management indicated flexibility in funding growth due to a low loan-to-deposit ratio and cash flow from securities [33] Question: Deposit betas in a rising rate environment - Management noted that deposit betas will depend on actions taken by larger banks and historical averages suggest a beta around 50% [34][41] Question: Growth in the C&I sector - Management highlighted strong utilization across various industries, particularly in energy and agribusiness [39][88] Question: Concerns about deposit base stability - Management acknowledged the uncertainty regarding excess liquidity and the potential for disintermediation from DDAs to other deposit types [80][82] Question: Trajectory of reserves and charge-offs - Management expressed a desire to maintain reserves around current levels, with concerns about the economic outlook impacting future charge-offs [96][98] Question: Capital deployment and buyback appetite - Management emphasized investing in business growth first, followed by M&A opportunities, and opportunistic buybacks as a last resort [103][105]